ey s excellence in integrated reporting awards...

EY’s Excellence in Integrated Reporting Awards 2018A su rv ey of integrated reports f rom S ou th Af rica’s top 100 J S E listed com panies

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Johannesburg: Friday, 21 September 2018

Cape Town: Wednesday, 26 September 2018

Purpose of the survey The purpose of the survey is to encourage and benchmark standards of excellence in the quality of integrated reporting to investors and other stakeholders in South Africa’s listed company sector.

Over the years it became clear that financial statements on their own did not tell the whole story of a company’s performance. Companies therefore started reporting on their environmental impacts, employee-related issues and corporate social responsibility issues in a separate report often referred to as a sustainability report, which accompanies the financial information distributed to shareholders.

Since 2010, all companies listed on the Johannesburg Stock Exchange (JSE) have been required to produce an integrated report in line with King III. This requirement has been carried forward to King IV, effective for financial years commencing on or after 1 April 2017. In addition, the JSE requires application and disclosure of King IV in any report lodged with them after 1 October 2017. EY has been commissioning the Excellence in Integrated Reporting survey for the last seven years in order to encourage excellence in the quality of integrated reporting to investors and other stakeholders by South Africa’s top companies.

Contact For more information on this survey, contact Larissa Clark, Director in the EY Professional Practice Group on 011 772 3094 or [email protected]

Disclaimer The survey has been independently prepared by the College of Accounting at the University of Cape Town. The views expressed in this survey are accordingly the views of the College of Accounting and not those of EY.

Workshops Excellence in Integrated Reporting workshops will be held in the following cities. Please contact Viv Mathys for more information: [email protected]

Excellence in integrated reporting winners 2017 – Kumba Iron Ore Ltd

From left: Ajen Sita (EY CEO), Johan Prins (Kumba) and Larissa Clark (EY)

EY's Excellence in Integrated Reporting Awards 2017

Third place - Sasol Ltd

From left: Paul Victor (Sasol) and Ajen Sita (EY CEO)

Merit award - Barloworld Ltd

From left: Moeketsi Nchoba, Lauren Wallace, Thirona Maharaj and

Christopher Whitaker, all from Barloworld

Fourth place - Nedbank Group Ltd

From left: Ajen Sita (EY CEO) and Bruce Thomas (Nedbank)

Tenth place - Standard Bank Group Ltd

From left: Professor Mark Graham (UCT), Larissa Clark (EY), Sandra Gouveia and

Stephen Brickett from Standard Bank, Glenn O'Hearne (O'Hearne Ferreira),

and Professor Goolam Modack (UCT)

02 Foreword 04 Why integrated reporting matters in the restoration of public trust 05 2018 Rankings 07 Top 10 companies 11 Overall impressions – at a glance 13 Adjudicators' observations and overall performance 17 The mark plan – at a glance 18 About the adjudicators 19 How can EY help?

ContentsExcellence in integrated reporting winners 2017 – Kumba Iron Ore Ltd

From left: Ajen Sita (EY CEO), Johan Prins (Kumba) and Larissa Clark (EY)

Sixth place - Barclays Africa Group Ltd

From left: Jason Quinn (Barclays Africa) and Lucia Hlongwane (EY Tax Leader)

Third place - Sasol Ltd

From left: Paul Victor (Sasol) and Ajen Sita (EY CEO)

Merit award - Barloworld Ltd

From left: Moeketsi Nchoba, Lauren Wallace, Thirona Maharaj and

Christopher Whitaker, all from Barloworld

Merit award - Exxaro Resources Ltd

From left: Carina Wessels and Hanno Olinger, both from Exxaro

Fourth place - Nedbank Group Ltd

From left: Ajen Sita (EY CEO) and Bruce Thomas (Nedbank)

EY Excellence in integrated reporting team

From left: Professor Goolam Modack (UCT), Mary-Anne Donachie, Lindsay Gotsman,

Viv Mathys and Larissa Clark (EY), Professor Mark Graham (UCT), Marieke Fourie, Gail

Moshoeshoe and Sarah Custers (EY)

Fifth place - Oceana Group Ltd

From left: Ajen Sita (EY CEO) and Zarina Bassa (Oceana)

Anglo American Platinum Ltd, Anglo American plc and Kumba Iron Ore Ltd

From left: Elizna Viljoen and Sarahan Zariffis (Anglo American Platinum); Saleh Mayet

and Romana Govender (Anglo American plc); Nadia Schoeman and Johan Prins (Kumba)

EY’s Excellence in Integrated Reporting Awards 20181

F ollowing a v olatile y ear of b u siness u ncertainty , th e need f or building trust and confidence in South Africa’s capital markets is a k ey priority f or b u siness and th e f u tu re prosperity of th e cou ntry . We believe that EY’s Excellence in Integrated Reporting survey and awards play an im portant role in restoring tru st b y identif y ing b est practice and standards of excellence f or integrated reporting am ong listed com panies.

As we m ark 21 y ears of Excellence in Reporting th is y ear, ou r program m e h as reach ed a deeper lev el of m atu rity . T h e program m e h as k ept pace with th e transf orm ativ e natu re of th e b u siness env ironm ent b y m ov ing f rom corporate reporting, th en su stainab ility reporting, ev olv ing into wh at is widely ref erred to as “ integrated reporting” .

Integrated reporting is about moving beyond financial information alone, to explain h ow an organisation creates v alu e ov er th e sh ort, m ediu m and long term . T h rou gh integrated reporting, th e opportu nity f or organisations exists to tell th eir own stories, with th e aim of b u ilding tru st and u nderstanding. Increasingly , organisations’ stak eh olders want m ore transparency and h onesty , com m u nicated in a way th at is m eaningf u l and clear. S tak eh olders want to b etter u nderstand wh at strategies are u ndertak en, th e im pact and ou tcom es of th ose strategies, and wh ere accou ntab ility exists in th e organisation.

At one point in th e early stages of integrated reporting, we witnessed th e com pilation of b eau tif u l m ark eting docu m ents m asq u erading as integrated reports th at were f ar- rem ov ed f rom th e realities f acing organisations. T h e cu rrent b u siness env ironm ent dem ands m ore su b stance ov er f orm , and th at organisations sh ou ld explain th e context and env ironm ent in wh ich th ey operate to th eir stak eh olders.

T h e im pact of digital transf orm ation and disru ption on b u siness h as started to raise new q u estions f or integrated reporting. F or exam ple, with th e prolif eration of data, q u estions arise ab ou t th e increasing im portance of th e gov ernance of data. Also, h ow do th e u se of “ b ots” , to stream line th e accou nting and reporting f u nction, increase quality and controls? Technologies such as artificial intelligence and b lock ch ain are transf orm ing ev ery aspect of corporate reporting. S o, h ow are organisations aligning th e im pact of th is to th eir strategic k ey perf orm ance indicators, and reporting on this to their stakeholders?

L ast y ear we saw th e introdu ction of K ing IV ™ C ode in S ou th Af rica. U nder th e new C ode, organisations are h av ing to explain h ow th ey h av e applied th e gov ernance principles in th eir own context. T h is h as resu lted in com panies explaining th eir gov ernance processes in m u ch m ore detail.

H owev er, th ere is still som e im prov em ent needed in explaining h ow th e gov ernance stru ctu res will create v alu e or prev ent v alu e f rom b eing destroy ed. T h is will go a long way to increase organisations’ legitim acy with th eir stak eh olders, driv e eth ical and transparent cu ltu res and b u ild pu b lic tru st.

On that note, it is our great pleasure to congratulate Nedbank Group Ltd for achieving first place in our 2018 awards. As you will read further on in this report, the judges felt that Nedbank was h igh ly su ccessf u l in its com preh ensiv e explanation of h ow th e G rou p creates v alu e f or its v ariou s stak eh olders, du ring th e cu rrent y ear.

W e are also pleased to congratu late all th e entities inclu ded in th e T op 10 f or th eir ou tstanding reports. All th ose com panies th at ach iev ed th e rank ings of “ Excellent” and “ G ood” are congratu lated f or th e exam ples th ey h av e set.

T h is su rv ey is m ade possib le b y th e continu ed inv olv em ent and dedicated efforts of Professors Alex Watson, Mark Graham and Goolam Modack, the panel of adj u dicators f rom th e C ollege of Accou nting at th e U niv ersity of C ape T own.

EY is committed to continuing the quest f or excellence in integrated reporting. W e h ope th at com panies will b e b oth inspired and encou raged b y th ose wh o h av e set th e b ar h igh to im prov e th e q u ality of th eir integrated reports.

By Larissa Clark, Professional Practice Director at EY

F oreword

For more details on how the companies were selected, the markplan and the adjudicators, please refer to page 17 & 18.

We believe that EY’s Excellence in Integrated Reporting survey and awards play an important role in restoring trust by identifying best practice and standards of excellence for integrated reporting among listed companies.

2 EY’s Excellence in Integrated Reporting Awards 2018

Foreword

“Boards play crucial roles in how their organizations create value: a board’s decisions and actions not only provide governance, but also determine an organization’s future outlook and ability to create value over the long term. So board members need deep understanding of their organizations’ strategies, stakeholders, risks and opportunities.

Governance disclosures in Integrated Reports can help stakeholders judge how well boards are performing.”

Mark A. Weinberger Global Chairman and CEO, EY


W h y integrated reporting m atters in th e restoration of pu b lic tru stBy Ajen Sita, CEO, EY Africa

What role does integrated reporting play in the restoration of public trust?

The revelations in the last 24 months ab ou t state captu re and corru ption h av e b rou gh t into sh arp f ocu s th e im portance of pu b lic interest and tru st. T h e accou nting and au dit prof ession h asn’t b een spared, with q u estions b eing raised ab ou t independence, au dit q u ality and serv ing th e righ t clients. In response, EY has prepared a Transparency Report, the first of its

k ind, th at we will produ ce annu ally , to sh are inf orm ation with th e m ark et ab ou t h ow we’re organised, h ow we m anage risk in ou r b u siness and h ow we serv e th e pu b lic interest.

As we recognise com panies f or th eir ef f orts to produ ce h igh q u ality integrated reports, b ench m ark ed in ou r Excellence in Integrated Reporting survey, it’s a rem inder of th e im portant public interest roles these reports play to build market confidence and pu b lic tru st. It is only th rou gh greater transparency and com m u nication th at com panies will start to reb u ild tru st.

How can integrated reports support companies’ engagement with their stakeholders?

Integrated reporting is m ore th an j u st th e reporting of th e financial performance of a business. This means that integrated reports sh ou ld consider th e needs of stak eh older grou ps su ch as em ploy ees, com m u nities, and, in f act, th e cou ntry as a wh ole.

Over the last 36 months it is evident, from the public outcry and negativ e m edia exposu re, th at m any com panies h av e ignored th is aspect of pu b lic interest and th e role th at th ey play in com m u nities and societies. T h is is an opportu nity f or B oards to tak e a leadersh ip role ov er th e gov ernance of th eir integrated reports and to ensu re th at th eir com panies, in addition to serv ing their financial stakeholders, are also playing a responsible and eth ical part in th e com m u nities and cou ntries in wh ich th ey operate.

What are the key priorities for companies to improve their integrated reports over the next year?

There are three aspects that, as EY, we would like to see com panies im prov e in th eir integrated reports:

1. T h e gov ernance of th e v alu e creation narrativ e. In oth er words, h ow do com panies ensu re th at th e story th at th ey share with their stakeholders is authentic and credible? There are m any way s th is can b e done and at som e point it wou ld b e great for audit firms to be able to provide assurance over the wh ole integrated report. H owev er, th ere is still a lot of work th at h as to b e done in th is area. In th e m eantim e, B oards sh ou ld consider wh ich parts of th eir reports sh ou ld b e assu red, wh at role th e organisation’s internal au dit f u nction can play and explain, in clear langu age, h ow th ey are com f ortab le th at th e inf orm ation th ey h av e prov ided is com plete, reliab le and creates v alu e f or th e organisations’ stak eh olders.

2. T h e th em es of disru ption, digital and cy b er secu rity rem ain top of m ind. C om panies h av e a u niq u e opportu nity in th eir integrated reports to explain h ow th ey h av e adapted th eir b u siness strategy to th ese external f actors and h ow th ey h av e considered th e risk s or opportu nities relating to th ese issu es.

3. In the age of social media and around-the-clock news, it is im portant th at relev ant inf orm ation is sh ared with b oth shareholders and stakeholders as soon as possible. Many integrated reports are only com pleted and circu lated m any months after a company’s financial year-end, dissipating their impact. Providing information to users in a more timeous m anner, will increase th e relev ance of integrated reports and elev ate th eir im pact as ef f ectiv e stak eh older com m u nication ch annels.


Why integrated reporting matters in the restoration of public trust


2018 Rank ings

“ H onou rs” is awarded to th ose h igh q u ality integrated reports, wh ich th e adj u dicators b eliev e h av e com e closest to com ply ing with th e req u irem ents of th e < IR> F ram ework .

Excellent ( wh ich inclu des th e top 10 positions)

G ood

Av erage

Progress to be made

T op 10with Honours with Honours with Honours

2018 Rankings


2018 Rankings

T h e adj u dication process rank s entities in th e f ollowing categories:

" Excellent" and " G ood" are awarded to entities th at progressiv ely ach iev e a h igh er lev el of adh erence to th e spirit of integrated reporting.

Good*African Rainbow Minerals Ltd

Anglo American Platinum Ltd

AngloGold Ashanti Ltd

Barloworld Ltd

BHP Billiton plc

British American Tobacco plc

Clicks Group Ltd

Coronation Fund Managers Ltd

Discovery Ltd

Distell Group Ltd

Glencore plc

Hammerson plc

Intu Properties plc

JSE Ltd

Massmart Holdings Ltd

Mediclinic International plc

Mondi plc

Mr Price Group Ltd

Northam Platinum Ltd

Redefine International plc

Sappi Ltd

The Foschini Group Ltd

Tongaat Hulett Ltd

Tsogo Sun Holdings Ltd

Excellent*Anglo American plc

Aspen Pharmacare Holdings Ltd

Attacq Ltd

Barclays Africa Group Ltd

Exxaro Resources Ltd

Gold Fields Ltd

Impala Platinum Holdings Ltd

Kumba Iron Ore Ltd

Liberty Holdings Ltd

Life Healthcare Group Holdings Ltd

MTN Group Ltd

Nedbank Group Ltd

Netcare Ltd

Oceana Group Ltd

Pick n Pay Stores Ltd

Redefine Properties Ltd

Reunert Ltd

Sasol Ltd

Standard Bank Group Ltd

Telkom SA SOC Ltd

Truworths International Ltd

Vodacom Group Ltd

Woolworths Holdings Ltd

Average*Astral Foods Ltd

The Bidvest Group Ltd

Brait SE

Capital & Counties Properties plc

Curro Holdings Ltd

Dis-Chem Pharmacies Ltd

Echo Polska Properties NV

FirstRand Ltd

Growthpoint Properties Ltd

Hyprop Investments Ltd

Imperial Holdings Ltd

Investec plc

Investec Property Fund Ltd

MAS Real Estate Inc

MMI Holdings Ltd

Pioneer Food Group Ltd

PSG Konsult Ltd

Rand Merchant Investment Holdings Ltd

RCL Foods Ltd

Remgro Ltd

RMB Holdings Ltd

Sanlam Ltd

Santam Ltd

Shoprite Holdings Ltd

Sibanye Gold Ltd

The Spar Group Ltd

Tiger Brands Ltd

Progress to be made*AECI Ltd

Anheuser-Busch Inbev NV/SA

Assore Ltd

AVI Ltd

Bid Corporation Ltd

Blue Label Telecoms Ltd

Capitec Bank Holdings Ltd

Compagnie Financière Richemont SA

Datatec Ltd

Fortress Income Fund Ltd

Globe Trade Centre SA

Greenbay Properties Ltd

Hosken Consolidated Investments Ltd

Italtile Ltd

KAP Industrial Holdings Ltd

Naspers Ltd

NEPI Rockcastle plc

Old Mutual plc

PSG Group Ltd

Reinet Investments SCA

Resilient REIT Ltd

SA Corporate Real Estate Ltd

South32 Ltd

Super Group Ltd

Vukile Property Fund Ltd

Zeder Investments Ltd

*Not ranked within categories

Excellent (which includes the top 10 positions)

2018 Rankings


The top 10 companies

2

By Mark Graham, Associate Professor,

University of Cape Town

1

1999

Nedbank Group LtdNedbank scored excellently in almost every aspect of the marking process by demonstrating a high level of adherence to the guiding principles and content elements of the International <IR> Framework. The report has a sensible layout with a clear and consistent focus on value creation. We particularly liked the comprehensive explanation of how the Group creates value for its various stakeholders as well as the detailed explanations of the value that the Group has created for each stakeholder grouping during the current year. The Group’s strategy is explained clearly and comprehensively together with key performance indicators, which track performance against previous strategies and sets targets for the future. Governance is introduced early on in the report with cross referencing to where more detailed information on various important governance issues can be found.

Furthermore, the governance disclosures are clearly focussed on how the governance mechanisms in place ensure and protect value. The trade-offs relating to each strategic focus area are outlined and explain the background to the tough decisions the Group has had to make together with the rationale for each decision that was made. Redefine Properties LtdRedefine’s report is once again an excellent example of how a property company can explain how it will deliver sustained value to each of its stakeholders. How the Group delivers value to their key stakeholders is explained early on in the report and appropriately sets the scene for the value creation narrative that follows. There is a high level of connectivity within this report and sensible use is made of icons that make appropriate links between the various content elements. The explanation of the Group’s various stakeholder relationships is particularly well presented and includes an innovative way of describing the quality and impact of these relationships.

The disclosure of the Group’s risks are comprehensive and we particularly liked the way in which risk heat maps were presented with both an 18-month and a five-year perspective.

Top 10 companies

Top 10 companies

EY’s Excellence in Integrated Reporting Awards 201877 EY’s Excellence in Integrated Reporting Awards 2018

Reporting against priorities identified in the prior year report adds credib ility to th e report. It is clear f rom th e report th at th e G rou p adopts an integrated approach to u nderstanding th eir b u siness. T h is is em ph asised with in th e explanation of th e G rou p’s b u siness m odel and with in th e extensiv e discu ssions arou nd th e six capitals and h ow th e strategy contrib u tes to th e dev elopm ent and preserv ation of th ese capitals.

Kumba Iron Ore LtdK u m b a’s report clearly sets ou t th eir strategy to create v alu e as well as an explanation of th eir capacity to deliv er on th is strategy with an appropriate f ocu s on h ow v alu e will b e optim ised f or all th eir stak eh olders. T h e description of th e G rou p’s b u siness m odel, togeth er with th e related v alu e ch ain activ ities and im pacts is excellent. W e particu larly lik ed th e detailed disclosu res of th e k ey ou tcom es and th e way it was m ade clear wh ich ou tcom es h ad a positiv e or negativ e im plication on v alu e creation in each stage of th e v alu e ch ain.

T h ere is com preh ensiv e disclosu re of k ey perf orm ance indicators f or each v alu e pillar th at inclu de a th ree y ear trend, a trend line graph ic as well as a clear indication of wh eth er th e ou tcom e was positiv e, negativ e or neu tral. T h e G rou p’s operating context is clearly explained with ref erence to th e m aterial issu es th at will h av e an im pact on th e b u siness m odel ( inclu ding som e sensitiv ity analy sis) and th e G rou p’s ab ility to create value. The way in which the financial statements are included within the Chief Financial Officer’s review and linked to th e v ariou s capitals u sing ‘ pop- u p’ b oxes is innov ativ e and dem onstrates tru e integration of reporting.

Sasol LtdS asol’s report is crisp and concise and clearly explains h ow th ey u se th eir six capitals to create v alu e f or th eir v ariou s stak eh olders. W e particu larly lik ed th e way th at inf ograph ics are u sed to conv ey com plex inf orm ation. T h e explanation of th e G rou p’s external env ironm ent and h ow th e env ironm ent will im pact th e G rou p’s ab ility to create v alu e is excellent. T h e description of th e principles th at are u sed to allocate capital is detailed and is a u sef u l indication of h ow resou rces are allocated with in th e G rou p.

T h e explanation of th e G rou p’s risk s and h ow th ey are dealing with th em is com preh ensiv e and we particu larly lik ed th e presentation of a “ watch list” th at ou tlines risk th em es th at cou ld potentially im pact th e G rou p in th e f u tu re. T h e G rou p’s operational rev iews ach iev e an appropriate lev el of granu larity with su itab le su m m aries of each operation’s perf orm ance, ou tlook and an explanation of wh ich of th e G rou p’s strategic ob j ectiv es is relev ant to each operation.

Vodacom Group LtdV odacom ’s report is stru ctu red in a way th at m ak es it easy f or th e reader to u nderstand h ow th e G rou p creates v alu e and to m ak e an inf orm ed assessm ent ab ou t th e G rou p’s ab ility to create v alu e ov er tim e.

3

4

5

2017

By Mark Graham

8 EY’s Excellence in Integrated Reporting Awards 2018 8 EY’s Excellence in Integrated Reporting Awards 2018

1999

The detailed description of how the Group creates and sustains value is excellent. The inclusion of detailed strategies within various strategic pillars and the inclusion of a longer-term perspective within the report is informative. Disclosure of three years’ performance against the strategic pillars demonstrates the embedding of the strategy into the operations.

The report clearly outlines the key trends within the Group’s operating environment and the way in which the Group will manage the risks and realise the opportunities associated with each of these trends. We particularly liked the expanded narrative that was provided on various stakeholder “hot topics”, which enhanced the explanation of the various stakeholder’s needs and concerns. Disclosures with respect to risk were well presented and innovatively enhanced with information relating to the speed at which the various risks, should they materialise, would adversely affect the financial performance of the Group.

Oceana Group LtdOceana’s report is easy to navigate and commences with a comprehensive overview of the Group’s business model and operating context. This includes a detailed businesses model infographic as well as how trade-offs are managed in the capitals and the issues that impact on the Group’s business model. The way this report addresses and reports on the various sustainability issues that will play a key role in the Group’s ability to create value is excellent. We particularly liked the way material risks are clearly presented within the report by using both inherent and residual risk heat maps to show the principal risks that will affect the Group’s ability to create value. Furthermore, the potential impact on value for each risk is clearly outlined, thereby enhancing the general connectivity within the report.

The disclosure of performance is excellent and the way both financial and non-financial performance is discussed with reference to each of the Group’s strategic objectives further evidences the integrated nature of this report.

Impala Platinum Holdings LtdImpala’s report sensibly starts with a comprehensive explanation of its business model that includes inputs, positive and negative outcomes as well as how the various activities within the business model contribute to the Group’s value chain. How the Group plans to generate value is clearly explained and elaborated on using the concept of the six capitals. The Group’s strategic objectives and the strategies necessary to achieve these objectives are clearly set out by the Chief Executive Officer. The inclusion of both short and medium targets for each element of its strategy adds credibility to the commitment to the strategy. We particularly liked the way the Group’s overall inputs, outcomes and strategies are carried through into the divisional reviews. The use of graphs that show the Group’s sensitivity to changes in key variables is excellent.

7

6


Top 10 companies


2017


Standard Bank Group Ltd S tandard B ank ’s report starts appropriately with an explanation of th e G rou p’s ov erall approach to v alu e creation. T h is explanation th en giv es clear link s to wh ere m ore inf orm ation can b e f ou nd on th e k ey areas of stak eh olders, strategy , risk and gov ernance. T h ere is a clear f ocu s on strategy th rou gh ou t th e report and th e way strategic considerations are wov en into th e h u m an capital and inf orm ation tech nology reports is particu larly com m endab le. W e particu larly lik ed th e integrated way th e report explained th e progress th at h as b een m ade against each of th e G rou p’s strategic v alu e driv ers.

In the context of a financial institution, the explanation of how the Group measures its financial outcome, together with the consequences of adopting the new IFRS 9 Financial Instru m ents standard is excellent.

Truworths International Ltd T ru worth s’ report tells its v alu e creation story in an engaging way with an appropriate f ocu s on its f ou r m aterial issu es. T h e report is crisp and concise and th e explanation of th e G rou p’s b u siness m odel is excellent. W e particu larly lik ed th e way th e report clearly separates and deals with its operations in its two distinctiv e geograph ical sph eres of operation. T h e connectiv ity with in th e report is h igh and th e su m m ary of m aterial issu es, risk s and opportu nities togeth er with descriptions of th e related perf orm ance m easu res, ch allenges and targets is u sef u l f or th e reader.

T h e section th at deals with th e B oard’s delib erations is innov ativ e insof ar as it separates th ese delib erations into th ose th at are k ey and th ose th at are rou tine, as well as classif y ing th e issu es into th ose th at h av e b een noted, considered, approv ed, au th orised or resolv ed.

Barclays Africa Group LtdB arclay s Af rica’s report clearly ou tlines its strategy to h andle its separation f rom its prev iou s parent and to b ecom e a standalone b u siness. T h e report once again su ccessf u lly u ses a b alanced scorecard approach to report on its m aterial m atters and to sh ow h ow th e G rou p creates v alu e f or its various stakeholders. Key stakeholders are identified within th e b alanced scorecard and desired ou tcom es f or b oth stakeholder and the Group are clearly identified for each elem ent of th e scorecard. W e particu larly appreciated th e way the first page of the report lists the key issues that a reader m ay b e interested in and wh ere m ore inf orm ation on each issu e can b e f ou nd. T h e b alanced scorecard perf orm ance summary with its clearly defined measures of success is excellent.

T h ere is a h igh lev el of connectiv ity with in th is report and sensib le u se is m ade of icons th at m ak e appropriate link s b etween th e v ariou s content elem ents.

9

10

8

By Mark Graham

10

47 C om panies rank ed as “Excellent” and “Good”, compared to 59 in 2017

“ Excellent” integrated reports h av e a

3 Integrated reports awarded an “Honours” compared to 5 in 2017

23 C om panies rank ed as “Excellent”,

a slight decrease from 27 in 2017

O v erall im pressions – at a glance


strategic focus, ,

an em ph asis on value creation and

a h igh lev el of connectivity b etween th e elem ents presented

11 EY’s Excellence in Integrated Reporting Awards 201811 EY’s Excellence in Integrated Reporting Awards 2017

Overall impressions – at a glance


1. Layout and structure of th e v alu e creation narrativ e continu es to im prov e

2. Increased disclosu res of th e value th at th e organisation is creating f or itself and oth ers

3. G eneral im prov em ent in th e explanation of th e strategy to create value4. Increased disclosu res of th e opportunities th at are av ailab le

5 . Ev idence of a b etter u nderstanding of th e difference b etween outputs and outcomes

1. V alu e creation not extended b ey ond financial value and/or the value that will

b e created f or sh areh olders

2. Governance disclosu res are largely b oilerplate and compliance driv en

3. T h e explanation of trade-offs b etween th e v ariou s capitals need to b e m ore

detailed and less superficial

4. Insufficient emphasis on balanced reporting th rou gh inclu ding th e

“ b ad news” and negativ e ou tcom es

5 . T h e link age and connectivity b etween th e various content

elements needs im prov em ent.

Positive trends

Negative trends

EY’s Excellence in Integrated Reporting Awards 2018 1212 EY’s Excellence in Integrated Reporting Awards 2018 12 EY’s Excellence in Integrated Reporting Awards 2017

Overall impressions – at a glance


Adjudicators’ observations and overall performanceBy Mark Graham, Associate Professor, University of Cape Town

Adjudicators’ observations and overall performance



13 EY’s Excellence in Integrated Reporting Awards 201713 EY’s Excellence in Integrated Reporting Awards 2018

• Top 100 Johannesburg Stock Exchange (JSE) Limited listed companies, selected on the basis of their market capitalisation as at 31 December 2017

• Integrated report or annual report for year-ended on or before 31 December 2017

• Largest in survey - Anheuser-Busch InBev SA (market capitalisation of R2.3 trillion)

• Smallest in survey – RCL Foods Ltd (market capitalisation of R11.5 billion)

• The 100 companies in the survey account for 93% of the market capitalisation of the JSE at 31 December 2017

Changes to the top 100

• Eight companies that appeared in the 2017 survey are no longer regarded as being eligible as result of falling out of the Top 100 due to declining market capitalisation or other corporate activity.

• New / returning in the 2018 survey:

• Astral Foods Ltd

• Datatec Ltd

• Dis-Chem Pharmacies Ltd

• Echo Polska Properties NV

• Greenbay Properties Ltd

• Investec Property Fund Ltd

• MAS Real Estate Inc

• PSG Konsult Ltd

Companies included in the survey

Key observations

• The quality of “Excellent” integrated reports continues to improve

• “Excellent” integrated reports have:

• a clear strategic focus

• an emphasis on value creation

• a high level of connectivity between the various elements presented and consequently tell the value creation story clearly

• Very little improvement in those integrated reports ranked as “Average” or “Progress to be made”

• Layout and structure of the value creation narrative continues to improve

• Increased disclosures of the value that the organisation is creating for itself and others

• General improvement in the explanation of the strategy to create value

• More reports using the concept of the six capitals

• Increased disclosures of the opportunities that are available

• Evidence of a better understanding of the difference between outputs and outcomes


Trends in the rankings

Excellent

Good

Average and progress to be made

By Mark Graham


27 28 2931

28 2723

29 30

35

27

33 32

24

44 4236

42 39 41

53

0

10

2030

405060

14

Areas for improvement

• Agree on what value organisation aims to create and report against that i.e. a value added statement should include impact on all capitals or be called ‘financial value added’

• Governance disclosures still largely boilerplate and compliance driven. Need a greater emphasis of how the governance structures will create value or prevent value from being destroyed.

• Include negative as well as positive outcomes

• The explanation of trade-offs between the various capitals need to be more detailed and less superficial. Link trade-offs to strategy i.e. how much financial capital will be sacrificed to have an operating process that creates more jobs?

• In some cases only strategy objectives are being disclosed without the detailed strategies that will be used to achieve these objectives

• The explanation of value creation needs to be extended beyond financial value and/or the value that will be created for shareholders

• Increase the emphasis on balanced reporting by including the “bad news” and negative outcomes

• Include a limited number of key performance indicators that will be used to measure the achievement of strategic objectives

• Improve the linkage and connectivity between the various content elements

1 International Accounting Standard 34 – Interim financial reporting (“IAS 34”)

Rankings

• 47 of the 100 integrated / annual reports reviewed this year were ranked as “Good” or “Excellent”

• Decrease in number of integrated / annual reports classified as “Good” or “Excellent” due to slightly higher expectations by adjudication panel now that <IR> is well established internationally

• 53 companies are not making a serious attempt to produce an integrated report that complies with the International Integrated Reporting Council’s <IR> Framework

Honours awards

• An “Honours” is given to those high quality integrated reports that are believed to have come closest to complying with all the requirements of the <IR> Framework

• 3 integrated reports were awarded an “Honours” award in the current year compared to 5 in 2017

Title of the report

• 19 of the 100 companies in the survey do not produce an integrated report

• 17 of these 19 companies have their primary listings on stock exchanges other than the JSE

• 10 of these companies have their primary listing on the London Stock Exchange

• 7 of the 10 companies with their primary listing on the London Stock Exchange and which do not produce an integrated report have a report that is ranked as being “Good” or “Excellent”

• 2 companies that have their primary listing on the JSE do not produce a report that is titled an integrated report


Audience of integrated reports

• The <IR> Framework clearly states that the primary purpose of the integrated report is to explain to providers of financial capital how an organisation creates value

• 29 of the 100 integrated reports clearly state that their integrated reports are primarily aimed at providers of capital

• 36 of the 100 integrated reports state that their integrated reports are aimed at a variety of stakeholders

Length of integrated reports

• Average length of reports in this year’s survey is 151 pages (2017: 149 pages)

• Average length of the reports that are titled an integrated report is 144 pages

• Shortest integrated report is 56 pages

• Longest integrated report is 297 pages

Style of financial statements

• Average length of financial statements within the reports is 36 pages

• Average length of the financial statements within reports that are titled an integrated report is 30 pages

• 46 companies in the survey included full financial statements in their report

• 22 companies in the survey include IAS 341 financial statements within their report

• 73 companies included their financial statements at the end of the report

• 9 companies include extracts of their financial statements within their financial review

Endorsement by the directors

• 64 of the 100 companies in the survey have an integrated report that is endorsed by the directors

• 52 of these endorsements were signed by the directors


* Industries included in other: Agriculture, education, healthcare, media &

entertainment, telecommunication and travel & leisure


Industries included in the survey

• More than 20% of the companies included in the 2018 survey operate in the consumer products and retail sector. Approximately 15% of the companies included in the survey are financial services, mining, industrial products and real estate development companies respectively.

By Mark Graham

16EY’s Excellence in Integrated Reporting Awards 2016

Cons

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10%

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2018 2017 2016

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2018 rating per Industry

Insurance

Industrial products

Mining

Financial services

Real estate development

Consumer product & retail

0% 20% 40% 50% 80% 100%

E G A P

EY’s Excellence in Integrated Reporting Awards 2018 16

By Mark Graham

• A further analysis of the entities per industry included in the 2018 survey, show that almost 80% of the mining companies included in the survey are included in “Excellent” and “Good” categories. This is followed by the consumer and retail products companies with 45% and the financial services and industrial products sectors that have almost 40% of the companies included in the survey included in the “Excellent” and “Good” categories.

The mark plan - at a glance

Further details of the mark plan and adjudication process can be found on our website ey.com/excellenceintegratedreporting2018

The Content Elements

The Guiding Principles

1. Strategic focus and future orientation

2. Connectivity of information

3. Stakeholder relationships

4. Materiality

5. Conciseness

6. Reliability and completeness

7. Consistency and comparability

The guiding principles underpin the preparation of an integrated report, informing the content

An integrated report includes content elements that are fundamentally linked to each other and are not mutually exclusive:

1. Organisational overview and external environment

2. Governance

3. Business model

4. Risks and opportunities

5. Strategy and resource allocation

6. Performance

7. Outlook

8. Basis of presentation

• Top 100 JSE listed companies

• Based on market capitalisation as at 31 December 2017

• Pure holding companies are excluded

• Dual-listed entities are included

• Eight newcomers and companies returning to the survey

• Integrated report for year-ended on or before 31 December 2017

Companies included in the 2018 EY Excellence in Integrated Reporting Awards:

Overview of the mark plan:

The mark plan is based on the <IR> Framework’s1, seven Guiding Principles and the eight Content Elements. In addition, consideration is given to the Framework’s Fundamental Concepts.

The Fundamental Concepts

The fundamental concepts underpin and reinforce the requirements of the Framework:

1. Various capitals that the organisation uses and affects

2. How value is created

1 International Integrated Reporting Council’s <IR> Framework, issued in December 2013.





Mark Graham

Mark is an Associate Professor and former Head of the College of Accounting at the University of Cape Town (UCT). He convenes the Master of Commerce (specialising in financial reporting, analysis and governance) programme, within the College and also teaches on the MBA, EMBA and Executive programmes at UCT’s Graduate School of Business. He consults to the accounting profession and regularly presents courses on various aspects of accounting, both public and in-house. Mark is the current chair of the adjudicating panel for the annual EY Excellence in Integrated Reporting awards. He has also previously been a member of the adjudicating panel, and prior EY reporting awards since they were introduced in 1997.

Alexandra Watson

Until March 2018 Alex was the Richard Sonnenberg Professor of Accounting in the College of Accounting at the UCT. She is a past member of the South African Integrated Reporting Committee Working Group, a Board member of the Global Reporting Initiative, a member of the Financial Reporting Investigations Panel and was the Chairman of the Accounting Practices Committee, the technical accounting committee of SAICA. Alex is an Independent Director of two listed companies and has been a member of the adjudicating panel of the EY Excellence in Integrated Reporting awards, and prior EY reporting awards since they were introduced in 1997.

Goolam Modack

Goolam is an Associate Professor and current Head of the College of Accounting at the UCT. He teaches financial reporting at an undergraduate and postgraduate level and has co-authored a number of financial reporting textbooks. He is also an independent director of subsidiaries of a JSE listed financial services group and consults to the accounting profession. Goolam has been a member of the adjudicating panel of the EY Excellence in Integrated Reporting awards, and prior EY reporting awards since 2005. Goolam is also a member of the adjudicating panel of the Malaysian Integrated Reporting awards since 2017.

About the adjudicators

Associate Professor Mark GrahamCollege of Accounting, UCT

Professor Alex WatsonCollege of Accounting, UCT

Associate Professor Goolam ModackHead: College of Accounting, UCT

About the adjudicators

18 EY’s Excellence in Integrated Reporting Awards 2018 18 EY’s Excellence in Integrated Reporting Awards 2018

How can EY help? Service Contact person

• King IV briefings, gap analyses and assistance with implementation Joanne Henstock

(011) 502 0364

[email protected]

Luveshan Naiker

(011) 502 0526

[email protected]

• Excellence in Integrated Reporting Awards benchmark report (including in-person consultation with one of the awards’ adjudicators)

Larissa Clark

(011) 772 3094

[email protected]

• Learning and development on integrated reporting: On-site briefings on the International Integrated Reporting Council’s <IR> Framework and on applying the Framework (including an industry relevant application)

Joanne Henstock

(011) 502 0364

[email protected]

Kelly Gilman

(021) 443 0473

[email protected]

► Other sustainability and integrated reporting services

• Gap analysis of existing reporting against GRI G4 Guidelines, <IR> Framework and local and international best practice and peers

• Facilitation of the materiality determination process

• Writing the sustainability or integrated report

• Assurance of non-financial information in the sustainability or integrated report

Joanne Henstock

(011) 502 0364

[email protected]

Kelly Gilman

(021) 443 0473

[email protected]

How can EY help?


How can EY help?


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